Trust in the EU, again

It has been evident for quite some time that citizens right across Europe are losing faith in the European Union, and the fact is making the headlines today. If the Euro experiment needs meaningful banking union, including some element of fiscal union, and probably other “deepening” reforms as well in order to survive, and if citizens are becoming increasingly hostile to “Europe”, meaning that such reforms are politically impossible, then the Euro may be doomed in the long run. In the meantime the never-ending Eurozone crisis, caused by a flawed currency, a dysfunctional central bank, and a perverse macroeconomic policy response, is dragging the entire European project down with it.

Update: bang on cue, Spain’s unemployment rate has reached 27 percent this morning. Solving the periphery’s economic problems rather than saving the Euro really has to become the continent’s top priority. Apart from anything else, you won’t be able to do the latter if you don’t do the former.

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187 replies on “Trust in the EU, again”

“Barroso argued strongly in two speeches this week that federalism was the only answer to Europe’s crisis of finances and of confidence. The German chancellor, Angela Merkel, brushing off widespread fears of a new German “hegemony” in Europe and the eurozone, also said that governments had to give up much more power to Brussels.”

Personally, I would not submit my dog to the tender mercies of any EZ institution at this point. He might be found to have the wrong (or no) pedigree and be unworthy of his continued existence.

It would be good to see a white paper from economists (hint,hint) to rationally consider the impact of Ireland leaving the Euro (but staying within EU).

The unemployment rate among young people in EU is a crisis – but these people are not the decision makers. Many grey heads in political circles warn of dire consequences of even thinking about it.

One risk that is continually raised is that it would affect inward investment. As someone who works in a MNC where labour costs are by far most significant cost, I am incredulous that a 20-30% drop in these (due to a weaker punt after leaving Euro) would cause our US bosses to jump ship.

We are where we are, not a good place – so an honest assessment of the pros and cons is warranted.

UK GDP surprise increase today. Unemployment at 7.9%, record levels of employment. UK borrowing costs at record lows. And the UK has as much sovereignty over its affairs as any modern country can have in a globalised world. Our best and brightest leave Ireland as soon as they can to get work in the UK. We should leave the Eurozone now and salvage what we can.

Wurope needs the ability to spend what is necessary to restore full employment, while at the same time make sure individual european governments do not have free hands to spend howevermuch they want.

Disciplining role should be taken away from the markets, period. How much to spend should be decided maybe in ECOFIN meetings or something similar, but after that decision is takes ECB could very well fund as much spending as is needed to carry out that objective.

And if some people are scared that central bank financing of deficits would lead to hyperinflation because of ‘money multiplier’, would it not be much more sensible to set lending limits to the bank directly, trough regulation, that starve whole economic system because of this fear?

So lets say to financial institutions: your assets (i.e. loans) next year can be 105% what they are this year, period. You can control bank lending by regulation if you want to.

What do you guys think about this proposal? Good or bad and why? Who is ready support something like this?

The key phrase is “..the Euro may be doomed in the long run”. This is the only way to do forecasting, at least if you want to be intellectually honest: it is conditional and uncertain over timing. The conditionality needs to be fleshed out a touch: the euro is doomed if growth fails to turn up. When might this happen? We honestly dont know. But that is the proper way to do economic forecasting: if certain conditions obtain, something will happen as a result, with uncertain timing. No growth, no euro. So far, it aint looking good.
The tragedy lies in the economic waste, the human consequences of all that lost economic growth. The puzzle is why so many serious people believe that that this is the best possible outcome and that a better one is simply unattainable. History just repeating itself perhaps.

Simpleton,
I would not say that serious people think dissolution of the funny currency is a better outcome,just the inevitable consequence of consigning half of the EZ to a debtors prison for a generation. That policy did not work well in the 1930s and we know how that ended up.
Maybe the best we can hope for is the non emergence of a vengeful megalomaniac in a serious country in the periphery.
It does seem though that austerity could take a breather and fiscal policy will be loosened-to use a pharase beloved of the followers of Keynes. What will we do when that theory blows up?

Its actually not that simple. The refusal to write debts down now is making the ultimate scale of the write-off ever bigger. Again, this will happen, we just dont know when. Current polices arent just mistaken, they are stupid. And we used to know better, we really did. From Simon Wren-Lewis:

The Allies wrote off 93 percent of the Nazi-era debt and postponed collection of other debts for nearly half a century. So Germany, whose debt-to-GDP ratio in 1939 was 675 percent, had a debt load of about 12 percent in the early 1950s—far less than that of the victorious Allies—helping to produce postwar Germany’s economic miracle.

If moving directly to the punt would cause awful transition problems, what about rejoining the sterling area? Could that be a half-way stage that would ease the road back to self-rule? Britain is in trouble, too, of course, but austerity has just about run its course there and should end soon.

I think being subject to London’s gyrations of policy is a far better deal than the Troika, and that sterling may be a way to start escaping from the euro noose.

It’s about power, isn’t it? The ones who suffer are not the same as the ones holding the debt. But they can’t hold the chaos at bay. None of the firewalls work. I think a lot of this crisis is artificial. Or at least optional.

Simpleton,
how do you write off the debt or at least take it away and put it in a corner? One possble solution is for the EZ govts to refi about 40% of their Debt into a 1000 year bond with a 2% coupon and for the ECB to buy it and stick it in a hold to maturity portfolio in the corner….would that work? While they are at it, they could also buy 30-40% of bubble era mortgages off the banks.
I nominate the sea off Dalkey Island as the place to put this portfolio.

It appears to me that Barroso has been way out of his depth for some time.

His latest statement where he suggests that austerity is the right policy but just doesn’t have political support is pathetic. He is practically cornering Dutch, German and Finnish politicians into insisting on continued austerity come hell or high water with that kind of talk.

Given the severity of this crisis, I think that the EU Council should explore appointing a new Commission or at least a new Commission President. If Mr. Barroso cannot be removed he should be prevailed upon to resign.

Beyond that, this crisis is precisely what the EU was made for and it is failing miserably. The bureaucrat’s tactic of incremental changes necessitating further changes has back-fired spectacularly.

The EU/ECB does not have legal responsibility or powers to deal with the issue, i.e. providing funding to keep the financial system afloat, but they are dictating policies to nation states who do have the legal responsibility and power to decide whether individual banks should be wound up. The nation states, have to do what they are told because they do not control their own currency.

The net point seems to be that if the necesary reforms is not achievable then the Euro, and all its promise of a share of the dollar’s ‘exorbitant privilege’, must be abandoned.

The key question therefore is what are the necessary reforms. Are there alternatives? Is there a minimum?

It strikes me that an achievable minimium might include the following
1. Redefining the object of the ECB to include promoting and protecting employment,
2. Implementing a unform bank resolution framework givng the ECB the power to resolve financial institutions,
3. Making the ECB responsible for making good on deposit insurance and allowing the ECB to finance that through helicopter money,
4. Agreeing, on an ad hoc basis, a general economic policy for the EU whereby those who do not have to engage in austerity agree not to do so for the next 5 years.

I am reminded a little bit of Lorenzo Bini-Smaghi’s faux introspective remarks recently about the European economy refusing to behave as it should when subject to the correct policies (Krugman was on it). I mean three years of procyclical policy and still the trend gets worse – surely we must hit the brick wall of confidence and fiscal sustainability soon?

Why has Mammon forsaken us?

Now Lorenzo is an extreme example of a former leading light of European Union technocracy. In his case it is particularly difficult to separate the malice from the incompetence, and then the incompetence from the ignorance, and then the ignorance from the neoliberal fantasy (I love the fact LBS is now ensconced at Harvard – the home of intellectual failure in post global financial crisis economics! Perhaps he, Rogoff, Reinhart and Alesina get together for lunches where they rail at the bias of reality against structural reform and fiscal consolidation).

Now LBS may be exceptional, but he is not unique. There is not a single influential figure in any European Union institution who is willing to admit that the observably failed policies have failed. These people are ideologically and professionally committed to a failed economic policy set and they will not change. In the case of the German contingent they can not even conceive of change (Sinn developed a stutter when asked about a dual mandate central bank at his recent sermon in Trinity).

Why would any one trust institutions when its top people have such a poor record at policy formation, forecasting and accountability and given that how do we forcibly clear the decks of these institutions or insulate ourselves from them?

@Tull
You know very well how to write off the debt: all sovereign debt held by central banks shold be cancelled forthwith. Or, more pragmatically, converted to perpetual war loan status. It is never, ever going to be repaid so just get on and recognise that fact.

There is no doubt that the financial crisis has dealt a serious blow to the viability of the European Union. The flawed architecture of the single currency has been cruelly exposed. But even before the crisis there was a growing scepticism. National political systems are partly responsible – often scapegoating Europe for unpalatable policies while claim praise for measures adopted in Europe.

The European elites of course are also to blame, not having made anything like the effort to “connect” with what they hoped would be a European demos. Fearing that the construction process would grind to a halt if there was too much democratic process, they have now run up against a swell of popular resentment and scepticism as people both realise how much power has been ceded and how ineffectively that power has been deployed to tackle the crisis.

Notwithstading these failings, the significance of the recent surveys has been a bit overdone. All large political systems have problems with legitimacy. A farmer in Montana sees Washington as a remote, corrupt, and ineffective beaurocracy. Surveys in the US in recent years often find that 75% of people distrust the federal government. So the negative ratings that European peoples give their centralised power is not new, but expected.

In Europe’s case, however, the elites should listen harder and act with more purpose to address the legitimacy problem, for theirs is only a partially formed polity, still very much vulnerable to centrifugal forces.

Unfortunately the sluggishness and inconsistency with which European leaders have responded to the crisis has been caused to some extent, perhaps even a large extent, by the national agenda which remain a priority for most leaders. Europe – its leaders and its peoples – are finding they cannot have it both ways. Real power is either at the centre or is distributed nationally, but it cannot be both.

“Solving the periphery’s economic problems rather than saving the Euro really has to become the continent’s top priority.”

I couldn’t agree with you more but while the people with the power in the EU are in charge, it is never going to happen. This is the blind spot in current ideology. People like Barroso have an agenda. They are unelected and determined to stay on until they either achieve it or it implodes (and they will be in a comfortable enough situation to move on to whatever they want to next if it implodes, without any suffering on their part).

It would be really useful if someone were able to reveal how much money/wealth Barroso (and others of his ilk) holds outside of the EZ and all the money/wealth they have stashed away out of sight.

These people – who have spent their life in so-called public service and never really done a job outside of ‘politics’ – have amounts beyond the dreams of what you would expect to earn by salary in that domain over the years. How did they get it (you wouldn’t believe how easy it is to make a paper trail that looks like you inherited it)? Follow the money. The truth is out there.

The scale of the crisis in Spain is mind blowing. It is hard to comprehend how living in a country with 27% unemployment must feel.

The Spanish government deficit for 2012 was 10.6%. Off the top of my head, I think the target started out around 6%.

In Ireland our unemployment rate is half the Spanish level and at least for all the pain of austerity, the deificit is reducing and on target. Yet the mood here is still pretty awful – understandably so. What must it feel like to like in Spain now with the unemployment rate and government finances spiralling out of control?

We have a least a year, perhaps three (autumn 2017), for this financial mess to fester. By then we will have had a general election (and maybe in the advent of a ‘quickie’). Just ‘shoot the breeze’ until then.

I had orginally referenced LBS in my post but edited him out for fear my bils could obscure the point.

LBS thought that the crisis would solve the problem – the EU would be given additional fiscal control over member state budgets and something close to federalism would be achieved out of necessity. LBS lack of compassion for the relatively innocent victims of the crisis in the financial system, his viewing european citizens as spineless servile subjects of the ECB and his lack of appreciation of the need of for any policy to enjoy democratic support left him wholly delusional and spouting nonsense. It is a very poor reflection on Harvard that they took him on.

Is your proposal to
– remove democratic control of budgets,
– introduce monetary easing subject only to control by independent technocrats,
– allow such technocrats supremacy over national governments,
– allow such technocrats to implement fiscal transfers without oversight, and
– risk inflation in the interests of full employment?

Can we not forgive Blodget his sins – it is ten years ago? (not endorsing Business Insider)

@simpleton

Though some say the Krugmanator’s ego might be experiencing a bubble I would argue that it is due to the rush for quality spurred by the crash in value of other assets, those assets being the credibility of any economist who used the phrase “market discipline” unironically in the last four years and anyone who clings to “rational expectations” (to pick a random example: German neoliberals (The Long Shadow of Ordoliberalism)).

It is striking how little major research on European growth or options for countries to exit the EMU, has been produced.

If Rogoff & Reinhart were the Svengalis for the pro-austerity folk, who have been their research counterparts for the opponents? Of course it’s not easy to produce such credible research.

Employment mandates maybe alluring but Japan produced the world’s best infrastructure over two decades to provide jobs; debt rose and it still remained in the doldrums. Now nobody knows how productive the new money printing program will be.

The issue of structural reform maybe a turnoff for some but a society that has been ageing for 20 years; is anti-immigration; not supportive of married women in the workforce and has a badly paid young workforce without job security, is hardly on the right track.

Meanwhile, apart from the motor industry, its once mighty industrial giants are badly struggling against US and Korean firms.

As to Europe, cross-border capital flows are seen as culprits of the crisis but not all of them were for speculation. The level has plunged since 2007 and it’s simply foolish to think that governments can fill this breach. However, big European companies have over €1tn in cash but they are inclined to invest in emerging markets.

Cross-border capital flows rose from $0.5tn in 1980 to a peak of $12tn in 2007 and down to less than $5tn in 2012. Eurozone banks have cut such cross-border lending and other claims by almost $4tn since 2007, and central banks now account for more than 50% of capital flows within the region.

Like Japan and Korea, dual workforces have developed too in Europe because the young do not have the benefit of collective power and they have been among the main victims of the recession.

It would be also foolish to regard the ‘end of austerity’ as a key victory as for a while at least, it could give the impression that the growth problem was solved. The fact is that austerity has mainly hit minorities in the private sectors. There have not been huge cuts in public spending in most countries.

China and the US are unlikely to embark on a big increase in spending anytime soon while in Europe, Germany is unlikely to lead it.

France has raised more in taxes than spending cuts and its public spending is still 56% of GDP — temps accounted for 13% of jobs in 2007 but more than 60% of job losses since the onset of the crisis. France’s public sector generated 600,000 net new jobs in the 1980s, shed 40,000 jobs between 2000 and 2009.

So it’s no longer able to rely on adding public sector jobs while growth in the private sector is mainly in health. China has 10% of its workforce in the public sector compared with France’s 27%.

As for Ireland and the euro, the issue of defaulting and the recent experience of Cyprus as a small country without friends, merits some consideration.

Labour costs are minor issues for MNCs engaged in profit and revenue shifting; only 7% of SMEs are engaged in exporting — so most private sector jobs are engaged in the domestic economy. FDI production has a high import content.

Nominal export value almost doubled between 2000 and 2012 but full-time jobs in the exporting sectors are still below the 2000 level despite a 25% growth in the workforce (inc the unemployed).

With stagnant real wages for decades, a shrinking trade union movement, cheap energy and innovation leadership, the US has become more competitive than Europe. US IT workers in real terms earn the same today as they did, generally, 14 years ago.

It’s likely that the current campaign against corporate tax evasion will have some negative impacts for Ireland in the longterm.

“In the meantime the never-ending Eurozone crisis, caused by a flawed currency, a dysfunctional central bank, and a perverse macroeconomic policy response, is dragging the entire European project down with it.”

On “economists”, sent some stuff on the RR paper to a guy I know who is responsible for a UK business in a straightforwardly meritocratic racing industry, This is how he replied:

“I’ve read that article now and what can be said?Thank God these folk aren’t
engineers,there wouldn’t be a bridge left standing or a plane flying if
engineers were so dodgy.”

I’m no fortune-teller but when Tony Blair managed to secure the Commission Presidency for Barroso in 2004, this is what was published in the New Statesman, under the title ‘A dedicated friend of the rich’,

Barroso’s links with kleptocratic and oli-rich Angola bear examination; he was the guest of honour at the lavish wedding for the Head of State’s daughter even while being the EU’s front man in advancing political and economic virtue in all directions.

That IMF guy said…
“The risk of stagnation is not remote given the anemic growth, fragmented markets, impaired balance sheets and half-baked reforms, said Lipton while urging the European Central Bank (ECB) to introduce some “unconventional” steps to target problem countries.

“Lending is sluggish and is something the ECB should look at. They have to consider whether their policy tool kit has ways to address either regional or central aspects of the fragmentation,” he said.”

@ MH-ff: “It is striking how little major research on European growth or options for countries to exit the EMU, has been produced.” “If Rogoff & Reinhart were the Svengalis for the pro-austerity folk, who have been their research counterparts for the opponents? Of course it’s not easy to produce such credible research.”

More research is a waste of time now. The issue is one of simple arithmetic, exponential functions and the finiteness of finite resources. But whose paying attention to this simple stuff? Have any of our economists actually engaged with the ruling economic paradigm of Permagrowth – and what it implies? No. None. QED!

“As to Europe, cross-border capital flows are seen as culprits of the crisis but not all of them were for speculation. The level has plunged since 2007 and it’s simply foolish to think that governments can fill this breach.”

Simple arithmetic says they cannot. What can be ‘grown’ on an exponential basis? Debt can, but not the physical economy which ultimately provides the surplus to pay back the borrowed principle and its debt overhead. Its known as being up Sh*t Creek without a paddle! Much easier to loot taxpayers and small savers.

“However, big European companies have over €1tn in cash but they are inclined to invest in emerging markets.”

Investing? In speculative (commodities and derivatives) markets for sure, but not in production ones – the rate of return in these latter is near zero.

“Like Japan and Korea, dual workforces have developed too in Europe because the young do not have the benefit of collective power and they have been among the main victims of the recession.”

This is what the Neoliberals demanded – and have achieved. Maybe they should not have wished so hard!

“It would be also foolish to regard the ‘end of austerity’ as a key victory as for a while at least, it could give the impression that the growth problem was solved. The fact is that austerity has mainly hit minorities in the private sectors. There have not been huge cuts in public spending in most countries.”

As far as ‘austerity’ goes, I reckon we have only reached the end of the beginning. I would prefer to wait until 2017. I had 2015 penciled in, but the global financial chicanery has continued – on steroids!

“China and the US are unlikely to embark on a big increase in spending anytime soon while in Europe, Germany is unlikely to lead it.”

China may do so; the US is completely insolvent. Sure the US may crank up ‘spending’ – but to what effect? More unpayable debt? China and other US treasury holders should be somewhat concerned?

“With stagnant real wages for decades, a shrinking trade union movement, cheap energy and innovation leadership, the US has become more competitive than Europe. US IT workers in real terms earn the same today as they did, generally, 14 years ago.”

Michael, you must be aware that the ‘growth’ in the US since 2000 is a complete virtuality. Its all accounting fictions. The total number of persons employed has not increased in 12 years – in fact it appears to have fallen back slightly. To make matters worse, it was the better paid jobs that were ‘free-gifted’ to Chindia. As for ‘cheap energy’ – it is nothing of the sort. But that is another story of the triumph of PR spinola over technical and geological reality. US productivity has improved – by shrinking its well-paid workforce and forcing those employed in services (except in the medical sector) to work shorter hours for less pay.

Effectively, the US has ‘stagnated’ for a decade. But you won’t hear this on the Spinola TV channels or in the press.

Our predicament is political. And our political leadership has been corrupted. They are hopeless. But, in time, we will rid of them!

“If the Euro experiment needs meaningful banking union, including some element of fiscal union, and probably other “deepening” reforms as well in order to survive..”
good conf. on this topic,papers are now available.
Financial Integration and Stability-Olli Rehn-enjoy.
perhaps a slight understatement….
“Policies have now been geared to actively address the linkages between financial integration and financial stability. We know that in the aftermath of a credit boom, the ensuing adjustment process is long and protracted, as the economy has to deleverage and credit conditions are tight. This weighs on consumption and investment. And in some countries this process is accompanied by unbearably high unemployment rates.”http://europa.eu/rapid/press-release_SPEECH-13-365_en.htm

What is Barrosso really up to?
Barroso argued strongly in two speeches this week that federalism was the only answer to Europe’s crisis of finances and of confidence. The German chancellor, Angela Merkel, brushing off widespread fears of a new German “hegemony” in Europe and the eurozone, also said that governments had to give up much more power to Brussels.

“We still haven’t found the answer to the question of whether we’re actually now prepared to unite on common economic parameters inside the single currency area,” she said in a Berlin debate with the Polish prime minister, Donald Tusk. “If we want to have a common currency, a common Europe, we have to be ready to give up our hard-won habits … That means we have to be prepared to accept that in the end Europe has the final word in certain things. Otherwise we can’t keep on building this Europe … To an extent, we have to jump over our own shadows. I’m ready for that.”

Isn’t the above by Merkel utter nonsense. Only 17 countries currently comprise the euro zone … so how can those outside the Eurozone be coerced into towing Berlins line. She is right when she said ” we can’t keep on building this Europe “

It would be also foolish to regard the ‘end of austerity’ as a key victory as for a while at least, it could give the impression that the growth problem was solved.

The next serious policy issue for Ireland may well be how it maintain a decent level of living for all its citizens in a world suffering from resource constraints, where low skilled manual labour is in less demand and where MNCs can move business units using skilled labour very quickly.

However, that is the next crisis. Let us get of the current hole first, and as a precursor to that lets make sure the institutions and our other partners in the Eurozone stop insisting on everyone digging.

If the institutions and the major national power-bloc of the Eurozone remains committed to “staying the course” on national debt and market fetishization then we have to find an alternate path (one more like that followed by the Danes and Swedes). That will not be easy but it will be better than surrender and despair.

Ah now, dat word ‘virtue’ is not all it’s cracked up to be (and I’m at someone’s going away do in Geneva at the moment and I’ve had far too much to drink already to reply sensibly – I’m told just now that I’m going somewhere to experience the best pork in Switzerland – let’s hope that’s not as painful as it sounds).

The Swiss think it’s all a money-making opportunity – the crisis in Europe. Short sell? No problem. Pile in on a ‘risk on’ day, no problem. Show me the money. In out and shake it all about.

I know. I really know. I certainly know about his stuff going on in Angola.

You should also look at his dealings and bank accounts in Brazil.

Can’t be the one blowing the whistle though or I will be found very easily….. and shot in a dark alley one night… and I have two young children and I want them to grow up with a Dad.

These people have the power of life and death – it’s only more obvious to a greater or lesser degree depending on the country they are in (e.g. it’s more obvious in a place like Iran than it is in Luxembourg but you still have the same kinds of people at the top). That, as I often say on here, is not a joke.

People have no idea what these people ‘at the top’ are capable of doing and the power they actually wield. I meeet a lot of these powerful c**** (and that’s a word I seldom use) every day – politicians and CEO’s etc. – and they are psycopaths …. not very pleasant people at all and I have no doubt that if they thought they could find a way to kill someone and get away with it…. no problem.

But of course, I will be laughed off as some kind of conspiracy theorist by saying stuff like that…… but I know that these people can kill you and get away with it. Especially those in political roles.

The Labour Ministers are a bit like partners in an old straightlaced Wall St investment house, where each partner carries part of the risk. They decide to sell the business to some bigger financial entity. The partners get the goldmine, but the associates, assistants and would-be partners get the shaft.
The she is this case is a he, but the dilemma is the same.

The issue of taxation is emerging as the next big thing, but not corporation tax. The wheels are coming off the FTT proposal as an internal paper posted by Open Europe reveals. Weidmann has also come out against it. Enter stage right the more popular issue of tax evasion where the larger players do share enough sufficient interests to actually do something about it.

Nope! Just wanted the spoils of government office. The rubbish about ‘being at the table to ensure fairness’ is a complete crock of political sh*t. Mind you, enough delusional folk believed this rubbish. Maybe they still do.

The post 1981 Irish Labour Party is NOT a socialist party: Right-of-Centre wolf in sheep’s clothing. Think, where is the median Irish voter? Yeah! Right-of-Centre! Coalition formation theory would suggest that a super-majoritarian coalition would be more interested in policy reforms. So much for the theory (in the Irish context!).

The general drop in support for all things European is hardly surprising. The general public have woken up to the fact that it is the current miserable crop of political leaders that is actually running the show. And the German electorate is also clearly waking up to the fact that the idea, carefully nurtured by Merkel, that country is immune to what is happening elsewhere in Europe is a myth.

Barroso has also recently confirmed his incapacity and, indeed, seems not to understand that the basic role of the Commission is to facilitate the finding of agreement among member states, not to join one side or the other in it. But that is what the leaders wanted; a weak Commission with a weak President and that is what they got.

There is, of course, a world of difference between tax evasion and tax avoidance. It will be interesting to see if the distinction can be maintained. One way or another, it is clear that EU leaders intend to have a success in the area at their next summit with the end of banking secrecy being in sight.

Avoidance v. Evasion
I see today that Apple are to borrow huge amounts of cash to pay dividends and fund share buybacks despite having cash balances of 145b$. Apparently a lot of the cash is abroad and bringing it back means paying tax.

All very quiet at the end of the doo really….. the Swiss don’t seem to do late nights or poking holes in anything…. whereas I was up to going out to ‘drink until you get arrested’ (which I can when Mrs PR Guy is not in the same country as I am)…..

Apparently, the pork place was ‘too far to go to’ so I went for a nice Thai meal in downtown Geneva with an English friend who knows an awful lot about horse racing (he trains them and you would recognise his name). It seems to me that if the Irish government put all that 30bn cash they supposedly have sloshing around on a horse in the 3.30 at Yarmouth tomorrow…… Irish debt problem solved 🙂

Or as my trainer friend often tells me: “there is no such thing as a sure thing in this game” – I’m sure I see some parallels in economic forecasting….

Does anybody think it is ironic that Germany is considered financially well run, but Ireland, Greece, Spain, Italy, Portugal etc are considered a shambles?

So who is wrong… the periphery or the core? What is the best way out of this mess.. to mimic the core or mimic the periphery?

If a break up does commence… Ireland should not be the instigator.. wait for some other country to break ranks first and perhaps we could sneak out the back door with the other Pigs unnoticed?

What is truly amazing… is that Greece is still in the euro. I just cannot believe they are still in, it just amazes me…. even after all this time… they still have not left euroland, if they have not left by now… perhaps they never will.

If you have a look at it you’ll spot the conundrum of resolving the debt crisis using your proposal which I’ll explain a little below.

Almost all money is electronic and exists as the accounting liabilities of the ECB or the commercial banks. For the ECB to ‘spend’ any extra money into the economy under the present system of the banks’ accountancy it has to create a liability on itself. But this has to be matched by an increase in assets and invariably the asset is a corresponding debt from the Government or a commercial bank. Hence increased ECXB spending increases the debt of the economy also. It wouldn’t resolve the debt crisis per se.

Even if the ECB printed euros their liabilities increase as ‘Cash outstanding’ increases. This liability must also be created with a matching asset, i.e. a debt to the ECB so even printing euros wouldn’t help.

As well as this the type of electronic money which the ECB creates is central-bank-money and it’s not in circulation.

As Vitor Constancio, Vice president of the ECB noted in 2011:
‘’Central bank reserves are held by banks and are not part of money held by the non-financial sector, hence not, per se, an inflationary type of liquidity. There is no acceptable theory linking in a necessary way the monetary base created by central banks to inflation. Nevertheless, it is argued by some that financial institutions would be free to instantly transform their loans from the central bank into credit to the non-financial sector. This fits into the old theoretical view about the credit multiplier according to which the sequence of money creation goes from the primary liquidity created by central banks to total money supply created by banks via their credit decisions. In reality the sequence works more in the opposite direction with banks taking first their credit decisions and then looking for the necessary funding and reserves of central bank money.”

P.S. I think we could update the banks’ accountancy procedures and record any new money as an asset of the central banks as opposed to a liability. The banks accountancy procedures are a relic from a time when new money was a liability because it meant a promise to pay a commodity, often gold. With such promises gone it makes no sense to have money as the banks’ liabilities.

Philip Stephens in an op-ed in the FT, ‘The New Deal for Europe: more reform, less austerity’ says:

the economy is too important to be left to economists. More importantly, it presents policy makers with a chance to escape a flawed orthodoxy.

Excessive austerity has seen much of Europe mired in depression. In spite of swingeing spending cuts and tax rises, debt is increasing. The crisis of the euro may be over, in the sense that the existential threat to the currency has been lifted. But the crisis within the euro is extinguishing political consent for European integration. The continent badly needs to reset its course.

The answer is not a new fiscal splurge. A heavy price must be paid for the unchecked spending and credit booms that ended in the global financial crash. But timing and pace matter. Governments with a demonstrable determination to raise long-term economic growth with supply-side reforms should be given more time to cut deficits.

Does anybody think it is ironic that Germany is considered financially well run, but Ireland, Greece, Spain, Italy, Portugal etc are considered a shambles?

So who is wrong… the periphery or the core? What is the best way out of this mess.. to mimic the core or mimic the periphery?

Sweden, Finland and Germany responded to financial crises with significant reforms. Ireland carried on with business as usual and the bubble provided a temporary prosperity.

President Jacques Chirac of France lost the appetite for reform after street protests in the early years of his presidency.

Until the 1990s, France was among Europe’s leading economies in per capita GDP. By 2010, however, the country had dropped to 11th out of the EU-15. Low labour force participation of older and young people, as well as high unemployment rates are the main drivers of this per capita GDP gap.

I hope the young Enrico Letta (46) will have a chance to govern Italy well.

The southern countries were particularly hit by globalization and within Europe competition from the former communist states.

Even Brazil had to impose special duties on Chinese shoes as its industry was facing decimation.

Italy has had a poor record in attracting FDI for several reasons. It’s the same with Greece even though it has a much better infrastructure than Romania and Bulgaria.

No country can be assured of maintaining a high standard of living or even reaching one without a sustainable model as Brian Woods Snr often says.

@ DOCM

What is interesting is that the US is leading the attack on personal tax evasion while its own companies are leaders in tax avoidance – – the term evasion is also appropriate as accounting manipulation that would not be acceptable from local companies, is often a part of minimising tax.

The EU Savings Tax Directive of 2005 was riddled with loopholes and subsequent attempts to improve it were vetoed.

The insider revelations of the fraudulent actions of UBS, the biggest Swiss bank, in facilitating American tax dodgers, triggered the FATCA (Foreign Account Tax Compliance Act) which is much broader in scope than just personal deposits. Foreign banks risk losing their licences to operate in the US.

There is little evidence that the lessons of this most recent economic crisis have led to a new understanding or determination to rebuild our economic and social model in a different way.

The Republic of Ireland has not been alone in championing a model of economic development which is short-termist and lopsided.

Reliance on ever lower rates of effective taxes for corporations and tax reliefs for those on relatively high incomes reduces the capacity of the Irish State to provide quality public services in an efficient and fair manner.

The policy of pursuing export-led growth through reliance on foreign direct investment is seen as the silver bullet that will deliver economic success once again.

There is an obsession with exports even though jobs in that sector have been static for years.

The target to be recognised as a ‘world-class knowledge economy’ by 2013 was based on a delusion that in the lexicon of Richard Bruton and Micheál Martin, ‘quality jobs’ would grow in the West while low paid manufacturing workers would continue to dominate in regions such as Asia.

Of course a job in a manufacturing plant can be much more interesting than sitting in a call centre battery-hen like production line.

Ireland produces 5% of the Dutch output of potatoes – – they export seed potatoes to China and the technology. In Ireland because farm welfare comes from Brussels, there seldom is attention to the greatest native resources.

How bad do things have to get before people wake up?

333 Action Plan for Jobs initiatives!! Let’s have a new ideas competition!

The first step in a long march is to junk the pervasive fairytales and look at the emerging challenges with a cold realistic eye.

Last Sunday’s NZZ featured an interview with Patrick Odier, head of the swiss assoc of private bankers. A very senior Brahmin gnome. He was instrumental in the industry response to the US, they said. But it wasn’t enough. They lost. The name of the game is power.

Said rift has been in existence for some time but I agree that this is a very public rebuff. (Barroso is in a second term and has not ruled out a third!).

@ MH et al

On the wider issues raised with regard to the collapse in public support, Merkel is quoted as saying that countries should not be afraid to address institutional issues i.e. “jumping over their shadows”. This is a bit rich coming from the leader who has jumped over her own shadow from the start of the crisis. The legal advice she received in particular seemed to have motivated her; that and the desire not to antagonise the two most respected German institutions; the Bundesbank and the Constitutional Court.

However, if something is not legal within the treaties it cannot be done blithely outside them instead. The ECJ judgement in the Pringle case is highly instructive in this regard. What the countries have undertaken to do on her insistence is in reality consistent with the treaties or, at the very least, is not caught by any prohibition in them.

On tax, some commentators in Ireland seem to think that this has nothing to do with the EU i.e. there is no fat lady. In fact, there are at least four or five depending on the issue under discussion. But that there is a push to equalise corporation tax across the EU is undeniable.

Now if that ‘obsession’ were a little more rational – and you point this out; use our natural resources as our export strength.

Manufacturing employments have been outmoded by computer controlled manufacturing and advances in robotic technologies. But then, who wants to engage in manual labour, in sh*tty conditions, for sh*tty wages (down on the farm!)? Most folk want to work in an urban setting with a desk and a computer!

“How bad do things have to get before people wake up?” A lot! A lot! The sheeple are not actually asleep but are anaesthetized.

Tom Healy opines that we ‘need fresh thinking’. Nope. Just some fresh heads. The current lot are past their sell-by date. And folk really do love their ‘fairytales’. Keeps reality at bay.

“The revenue environment is tough, we’ve forecast for it to remain tough and this banking deal is predicated on a prudent set of assumptions. They’re realistic and take account of the economy we face in this country which doesn’t show any signs of a pick up.”

What is (contemporary) money? A Medium of exchange? Nope. A means of making payments? Sort of, but mostly no. A means of speculative gambling? Most assuredly yes. This is because contemporary money is approx 97% virtual money – its electronic. It has no prior physical existence (its fiat stuff) and can be moved around using computer controlled software. Its makes Mercury look positively glacial.

It is critical to recognize the nature of the ‘economy’ that fiat is emitted into, that is, the reigning economic paradigm. Its known as Permagrowth. This is an annually, compounding increase in aggregate economic activity. This is terrific in theory, but impossible in the long term since economic activity is firmly based within a physical system governed by absolute laws of nature and iron rules of maths. Whereas, the Permagrowth paradigm is based on virtual (non-physical) constructs.

The Permagrowth paradigm was designed to explain (and to dictate) the nature of economic activity. Until the mid-1970s this was a Production/Consumption type economy, but since that time a new type of economy has emerged and has become completely dominant, the Finance, Insurance and Real Estate (FIRE) economy. It is into this economy that fiat money is being emitted – and the one and only product of the FIRE is exponentially increasing debt overhead. Boom time comes in two flavours. Massive increases in asset prices (not value). And massive insolvencies.

That was a selective description. Its all a tad more complex. We actually need a new economic paradigm but junking the old is politically unacceptable. Just observe the excesses that some regimes will go to to cling onto power. Hunker down!

@BW Snr
“Manufacturing employments have been outmoded by computer controlled manufacturing and advances in robotic technologies. But then, who wants to engage in manual labour, in sh*tty conditions, for sh*tty wages (down on the farm!)? Most folk want to work in an urban setting with a desk and a computer!”

I think that paints an inaccurate picture of manufacturing. Modern manufacturing is not separable from invention, marketing, customised services etc and has little to do with drudgery in satanic mills. Just look at medical device manufacturing in Ireland or some of the fab-less semiconductor businesses operating here.

Germanic Europe is full of mittelstand-type businesses which are an expression of national pride in engineering, ingenuity and excellence in technology. Businesses like these can take root and grow in a stable business environment with a large easily-addressable market and a social acceptance of the idea of making long term investments rather than chasing quick bucks.

Manufacturing is not outmoded by technology and automation and never will be. It is simply the case that some types of activities reward heavy automation while others do not. What has happened, unfortunately, is that Asian outsourcing and low cost international logistics has wiped out old inefficient manufacturing in Ireland and elsewhere. All across the West you hear the sucking sound of intellectual capital, ‘manufacturing employment’, tacit knowledge and financial capital disappearing towards developing countries as the great equilibration of wages between West and East proceeds apace.

On the other hand, rising energy costs and inventory costs associated with global sourcing and shipping, and rising wages in Chindia are rebalancing the relative competitiveness of Western manufacturing and engineering firms. An increasing realisation by governments like the Irish, US and UK that manufacturing is not cleanly separable from design and innovation is belatedly leading to enterprise and tax policy changes. There are fewer reasons with each passing year why mittelstand-style businesses cannot be built and operated from an Irish base, now that the distractions of quick bucks for brokerage activities are gone forever and realists contemplate the impending decline in employment tax flows and professional services earnings from the national business model – hosting tax-sensitive US FDI firms.

You mention the FIRE economy. Germany is missing a key element of that- house prices are way lower than elsewhere. German wealth per head is consequently lower than that in Greece. Maybe the model for the future will follow this approach. What the Germans tend do well is quality. There is no reason why Ireland can’t follow that.

“No country can be assured of maintaining a high standard of living or even reaching one without a sustainable model as Brian Woods Snr often says. ”

Agreed,

In addition Ireland requires to shift away from carbon, perhaps a hydrogen based source of fuel. I know there are many negatives about hydrogen… but battery technology cannot match the internal combustion engine. But getting away from carbon has to be the future.

Re property – yes this is dysfunctional in Ireland. I can’t understand it but there is a mini bubble being inflated again in the capital. I need help understanding why we’re so prone to property bubbles

Re property – yes this is dysfunctional in Ireland. I can’t understand it but there is a mini bubble being inflated again in the capital. I need help understanding why we’re so prone to property bubbles

We’re not. Ireland is a oligarchy. There are oligarchs in control of the property sector and they effectively set the price. There are oligarchs in control of the legal establishment and they set the laws. There are oligarchs in charge of the political system and they preside over the whole scandal with aplomb. They are all criminals essentially.

My understanding is that the older generation were taught to blame England for all of Ireland’s woes. But the lesson for my generation is that it was our own who betrayed us from the very beginning, and who continue to do so. The wasted potential of Ireland is a direct result of the criminal nature of the native Irish ruling classes.

If the Euro does break up, Germany will be the loser. I had this vision of Mrs Carter aka Beyoncé leading the Finance Ministers of the peripheral countries in a song for Angela

All the single Piggies
All the single piggies

Now put your hands up
Up in the club, we just broke up
I’m doing my own little thing
You decided to dip but now you wanna trip

‘Cuz another neo keynesian brother noticed me
I’m up on him, he up on me
Don’t pay him any attention
‘Cuz I cried my austerity tears, for three good years
Ya can’t get mad at me

‘Cuz if you liked it then you shoulda put a banking union on it
If you liked it then you shoulda put a bank recap system on it
Don’t be mad once you see that he want it
If you liked it then you shoulda put a true currency union on it

A group of 8 banks including state-owned AIB and Bank of Ireland has agreed to write off almost €140m in debt owed by Independent News and Media (INM), publisher of the Irish Independent and Sunday Independent.

Expect a front page editorial in the next issue of the Sindo expressing grateful thanks to the Irish people for the bailout.

It will be interesting to see if the German Constitutional Court court accords parity of esteem to that other revered German institution the Bundesbank in their opposition to Bond buying as reported by the Telegraph today from an apparently leaked document….
“10.21 German newspaper Handelsblatt reports today that the Bundesbank has rejected the European Central Bank’s bond-buying programme in a confidential opinion for the country’s constitutional court.
Gary Jenkins of Swordfish Research notes that the Bundesbank rejects the idea of sovereign bond purchases in strong terms.
Apparently, the Bundesbank reckons that the so-called Outright Monetary Transactions could undermine independence of central banks.
But, the Bundesbank president Jens Weidmann has been public from the start about his organisation’s opposition to the OMT programme launched last September by Mario Draghi (pictured above). He has criticised the programme many times.
The Bundesbank has confirmed as genuine the leaked report. The bank has also confirmed that Mr Weidmann will travel to the constiutional court hearings in June.”

The standard response from the Northern countries involved would be that nobody is forced to buy their goods. But this an answer which will lead nowhere as it ignores the unquestioning thinking that sees a large export surplus as a good thing in all circumstances (which include all kinds of imaginative restrictive actions to promote it).

Incidentally, as another example of further responsible leadership, the Handelsblatt has published the opinion of the Bundesbank submitted to the Constitutional Court calling into question the legal and technical basis for OMT!

On the general topic of whether or not there is need for further “integration” to enable both the EU and the euro to survive, there is no evident connection as the unlikely alliance between Merkel and Cameron the need for treaty change confirms, one ostensibly wanting more the other clearly less. To quote General de Gaulle, “you cannot make an omelette out of hard-boiled eggs”.

Nevertheless, the respect that still exists for already agreed EU rules is having an impact, notably in Ireland in relation to the ECJ decision on the redundancy conditions for the Waterford workers. While there are few such rules in relation to general social conditions, there are in relation those governing workers. The decision points up the evident failure to recognise in Ireland the need for the uniform protection of workers – as between conditions for those in the public sector (now evidently including the state-owned banks) and the private – which is taken as dogma in the Scandinavian countries.

It is largely immaterial in terms of outcomes whether reform occurs on such a basis or a voluntary one although the latter is clearly preferable.

Probably not! Both institutions are led by young Turks running with their new-found status and doing what they think is expected of them. The record to date, however, in the view of many German commentators, is that they are all bark and very little bite. Of course, they may both be wrong.

I think August is going to be another big mess this year, a la 2011. I can’t see the austerians pushing through the nihilism for another winter. It just isn’t working. Very interesting to see the FT changing tack recently too . And I don’t see many on this site flogging TINA lately either.

FYI a very good analysis of the crisis in the FT by a noted Italian financial journalist.

Almost 75% of Germany’s 2012 surplus was ex-EU27. Is that not a positive situation for Europe?

The German foreign merchandise trade balance showed a surplus of €188.1bn in 2012, which is the second largest surplus since the introduction of foreign trade statistics in 1950, according to Destatis, the federal statistics office. In 2011, the surplus of the foreign trade balance had been €158.7bn. The largest surplus to date of €195.3bn was recorded in 2007. The deficit in services was –€6.7bn.

€140bn of the trade surplus was ex-EU27 or 74.5%; €41bn of the surplus was with non-Eurozone EU countries e.g. UK, Sweden, Poland etc; the surplus with the other 16 Eurozone members was only €7bn.

The Volkswagen-owned unit in Portugal and its SEAT subsidiary in Spain are significant exporters in those countries and their shipments to for example China and the Eurozone excluding Germany, are not included in German data.

Irish and Dutch current account balances are distorted by multinational profit shifting.

OECD value added data show that German exports have a higher import content than US exports.

Surpluses such as China are exaggerated as for example the per unit value added of Apple’s iPhone 5 is about $8 but each unit shipped to the US includes materials imported from other Asian countries such as Japan and South Korea.

So the facts on Germany’s surplus have changed and within the Eurozone, German trade is benefitting other member countries.

The ex-27 surplus is a big plus for Europe — wonder how poorer Europe would be without it?

@DOCM
Thanks.
Seems to be the day for leaked reports…from the Observer…
“French president Francois Hollande’s governing socialists have delivered a blistering assault on Germany’s chancellor Angela Merkel, accusing her of causing the single currency crisis that has been tearing Europe apart for more than three years, of acting selfishly and intransigently in her own political and German national interest, and demanding a “showdown” with the “chancellor of austerity.”

In a draft paper on party policy on Europe ahead of a conference in June, the socialists contend that Europe is being run by a rightwing Anglo-German cabal dominated by liberal free trade interests with the rest of the world and austerity within the EU.

They call into question the Franco-German alliance that has been at the heart of the EU for as long as it has existed and argue that France alone of the big EU countries has a government that is genuinely pro-European.

Merkel, as well as Hollande’s predecessor, Nicolas Sarkozy, and David Cameron come in for stinging attack. Merkel and Sarkozy, the draft declares, managed to turn a small crisis that started in Greece more than three years ago into a mega-European disaster.

The 21-page draft leaked to le Monde which said it had the tacit support of Hollande’s government has been organized by Jean-Christophe Cambadélis, a party vice-president.”

It seems like all out war. Angela is being boxed into a corner with her austerity plan in tatters (except in Ireland) with Spain tearing up their agreements (they got the money for their banks) and Italy highly unlikely to be able to implement any reforms with the cobbled together ragbag government.
As Seafoid says above..it could be a messy winter or even summer.

@MH
On those Indo results…contrast the two reports…
Irish Times..
“At the same time, the media group announced a pre-tax loss of €254.9 million for last year compared to €63.6 million for 2011 on the back of falling ad revenues.”

Indo ..
“The company also announced 2012 results with revenues of €539.7m for the year on operating profits of €59.7m.”

Olli Rehn has a blog! He begins by trying to be funny! He should get a better photographer! He drones on about how he’s been right all along! Why, he’s barely read Rogoff and Reinhart! He wouldn’t know them if they drank 90% of his coffee! They’ve read plenty of other things! Lots! They even do their own serious work! It’s not all about cutbacks! Structural reforms will work their magic! Any minute now! If you click on the photo it goes to Kaa singing Truustht in Me (nice touch)!

We have had this discussion before. I summed up the situation as most objective commentators IMHO see it; Germany is eating the lunch of European competitors in export markets, whether intra-EU/EA or externally in third countries. Spain and Portugal are responding in kind by shifting the focus of their exports to third countries. France and Italy have nowhere to go.

The leaked paper from the French Socialists simply confirms that it is a party made up either of civil servants or millionaires. It is utterly clueless in the face of the challenges confronting France. Nothing much has changed since the time of Mitterand and that is the problem. Then there were references to “Socialists who drive around in Citroen CX’s”. Now they are referred to as “caviar socialists”.

I also instanced on several occasions the type of protective administrative measures Germany utilises, notably the absence of a minimum wage. A more blatant and immediate example is the imposition of a levy on consumers to subsidise the costs of heavy industrial users of energy! (The last mentioned may be fixed before the elections as a German court has already condemned the measure as anti-competitive and the government probably has to act before the Commission rules on a parallel complaint from a representative group of German consumers; and hits the government with a hefty fine!).

maybe indiscreet question, so think about it, but how did you get to this link?
Because I can download this, but If I take the “normal” way, I still run into a paywall. And I dont care about the 99 cent, but I have giving my credit card number away.

The same goes for NBER papers. I can ask some old mainland China friends, who get free access, if I really want it, but its usually a time delay.

I dont know of any translation so far, its pixeled ….

I knew the issue to be burning, and since a lot of folks seem to interpret “within our mandate, everything to rescue the Euro”,

and “strict conditionality” of OMT to be dependent on ESM approval, where Germany has a blocking minority, very different from us,

it seems to get hot now.

My unterstanding is, that it is a German court, which could sent in police, to interrupt illegal actions at the ECB, at least for a while : – )

But some people here also feel that the german supreme court guy Voßkuhle talks a little bit too much in public and to politicians.

Having had opportunity to review the press reaction across Europe, it seems that Weidmann may well have made his ultimate miscalculation. He seems to live under the delusion that the Bundesbank is Europe’s central bank while the head of the relevant court of the Constitutional Court, Vosskuhle, thinks likewise with regard to his court as far as the role of constitutional courts is concerned.

This is a joint delusion up with which other countries simply will not put.

@DOCM
Perhaps you are right that Weidmann has made the ultimate miscalculation…but then how does Merkel deal with him. I note he intends to appear before the court in June. The opinion of the Bundesbank has to carry enormous weight before the Constitutional court on an issue of this kind…a lot more than that of the Government of the day.
As far as the Constitutional court is concerned they still believe that the German Constitution takes precedence over EU laws and treaties..as they have demonstrated on various occasions.
It could be a game changer.

In the meantime Paul Krugman has a name for the result of austerity in Ireland…..Stagnation. Looks like he is right…dire retail figures today.

I was still awake last night, when the FT link came out, and then wondered, while there was just one response over full 11 hours.

The Qimonda bankruptcy taught me a lot. About people with good character, like the colleague I mentioned at great length, and others, with room for a lot of improvement.

And I was kind of torn too, in my brain I knew that we were doomed, I knew a lot more and understood more than most others, but I had also nvested a lot of heartblood and work there, and had decided to stay to the very end. I had also seen, how the IBM folks came out of their deep despair, and how trust their was restored. And sometimes, just not that often, miracles do happen. Neighbor AMD a.k.a. GlobalFoundries was rescued by some arab investor, and actually seems to work by now.

People lost their nerves, in the last 3 month I spent about 30% of my time, just plugging holes, others left, because they just couldnt anymore. People with kids and high mortgages having accidents because of lack of concentration, a meeting with 3 people having gloves on, because their skin was acting up. Some guy with a french background actually trying to stir up violence.

And we brought all of it to an orderly end. The creditors, including ourselves are payed by now.

And the world did not end. Dresden is prospering, and we do build new kindergardens and schools.

Merkel, or, rather, the German body politic will deal with the situation created by the two Young Turks in question in the same way as as happened previously. The two – the Young Turks, that is – will huff and puff but come up with a face-saving formula (e.g. the ESM judgement “thus far and no further”) which will be another bark but not actually amount to a bite and those not bitten will react in an appropriate manner.

Such a political game would be out of the question in other European democracies. But that is the system Germany was left with after WWII.

Ideas:
What happened to the European dream?
25 April 2013 Kultura Sofia

Amnesia, recession, the failure of political elites, divided societies… The free and caring Europe that was the dream of oppressed peoples no longer exists, it is just that European leaders lack the courage to admit it, says a Bulgarian political analyst.

Er, no. As Prof Soddy intoned – there is wealth, virtual wealth and debt. I believe D-land leads in the first, G-land leads in the latter two. 😎

@ Tony Owens. Thanks for that comment. I was opining in a general way about the number of employments that might be available. If productive manufacturing embraces computer controlled robotics – human employments must decline in this sector. And where will employments be found? I have no idea, but the prognosis for increases in employments (other than ‘down on the farm’ work) is somewhat dim.

Looks like the passengers on the good ship S.S. EU have morphed into a revolting lot. Who’s up on watch, by the way? The officers appear to be otherwise engaged – throwing each other over the side.

Yes the Germans do indeed exploit the lack of a minimum wage. Our Belgian friends are feeling very exercised by the fact Germany is using the mini jobs scheme to exploit workers.

Thanks to that policy though Germany can cover the high end manufacturing sector while at the same time exploiting eastern Europeans to work the low wage side. Luckily those workers have no pension funds so its a win win.

There is little that one could disagree with either in terms of AEP’s own comments or those reported in the article.

The difficulty for squabbling second rate politicians, including central bankers and court judges it would seem in this case, is that the more noise they make, the less notice anyone pays to them. It is to be hoped that this will also hold true on this occasion. The beauty of OMT was always in the eye of the beholder, in any event. But the markets cannot know what the the governing council of the ECB might decide to do, especially in the face of Weidmann’s blatantly wrecking antics. A good position for any central bank to be in.

The crisis has accentuated the selfishness of EU countries, triggering the abandonment of cooperative European integration. A Spanish philosopher argues that cohesion and interdependence must be regained before an irrational north-south divide tears the EU apart.

@DOCM
It would appear as if the Bundesbank are correct in at least some aspects…
“It said Greek debacle had shown that conditions cannot be enforced, and, in any case, is “very questionable” whether it is desirable to drive down the borrowing costs of profligate states.
To cap it all, the Bundesbank said the ECB has no mandate to uphold the “current composition of monetary union”. Its task is to uphold price stability and let the chips fall where they may.”

A report on March tax take in Greece looks like the situation is dramatically deteriorating …..
“Tax collection in March fetched no more than 746 million euros, while the fresh arrears of 800 million brought the total amount of debts to the state to 57.2 billion euros. This includes 9 billion in the old debts of bankrupt companies and taxpayers, while another 3.67 billion concerns old debts of state corporations and utilities, municipal enterprises and other corporations in the broader public sector.”
So maybe Weidmann is right after all.

“Trust” in the money /banking context is the wrong leading concept here. Too much emphasis on that aspect is wrong. Monetarily, people are more practical than that…”utilitarianism” rules when it comes to “survival of the fittest”. I understand that Ireland’s (older) “majority” prefers easier survival in the Euro “cracks” rather than starting again, particularly when so much youth is leaving or has left (reducing ability of the State to pay undermining people’s sense of security /safety net). In Europe, including Ireland, this sticking-to-Euro’s high value is a generational issue in the social context…Older people think that the younger people will have time and health to recover, but are unwilling to take the real pain (again, unless forced). Older Irish people feel “entitled” to be looked after, given their hard work, etc over the years. Ditto elsewhere. When JG above refers to a large number of Irish people prefering to stay in the Euro rather than leave, this is what is reflected in reality. A good example is the Waterford Glass pension item where the State must “protect” pensions…..Who wouldn’t prefer that if you are at or approaching retirement age? In that sense, again, socialist Europe is an easier option than a Euro exit for the (older) majority….while the younger generations have never really had experience of serious deprivation, etc….

The “problem” (if that is the correct word) with this thinking is that it lacks wider “social responsibility and solidarity”…something that was lost over the years since the Thatcher years when the “me fein” aspect took precedence. The balance has yet to swing back…..Not yet as people don’t “trust” each other and the European welfare system(s) have been undermined of course…..but rebalance socially may of course happen more violently as we move forward and continue with this EU debacle.

Not economics therefore….mostly people /politics. “Survive or die” is prevalent…”. How things should be or work in a fair society” be damned when survival is at stake.

The Torygraph story illustrates that Weideman is willing to destroy the European project, break up the EZ, cause a global depression and have Germany take the blame.
The debate about the end of austerity is now over. The Public sector unions are waving their arms and threatening action against pay cuts. They will be lucky to get a pay cheque at the end of this.
It is probably long past time for Germany to leave the EU and take its place among the community of states run by nut jobs.

I don’t think the Bundesbank or Germany have ever regarded international treaties as superior to national law – there’s always an implicit get-out clause so that the treaties can be abrogated in the national interest. The legal basis for this seems to be “ultra posse nemo obligatur” (no one is obliged to do more than they can do). “Pacta sunt servanda” is only for the little countries.

This was illustrated with the famous “Emminger letter” which was a secret agreement made between the then FRG government and the Bundesbank. The formal EMS rules specified that the Bundesbank was obliged to intervene when a weak currency hit the bottom of its EMS band (using short-term credits). The secret agreement was that the Bundesbank could ignore the rule in certain circumstances (e.g. some unspecified limit had been reached). The Bundesbank wanted it written down, but Helmut Schmidt refused; instead he wrote an “R” for “richtig” (right) on their letter and showed it to the Bundesbank council, as his way of satisfying the Bundesbank’s demands. Here’s what he said at that meeting

“What interests me here is a part of the third point of your letter. I must say to you openly that I have quite severe misgivings about a written specification of this sort, a written specification of the possibility of an at least temporary release from the intervention. Let us first of all assume that it appeared tomorrow in a French or Italian newspaper. What accusations would the newspapers then make in editorials against their own Government who got themselves mixed up with such a dodgy promise with the Germans. A Government which promised them to intervene in the framework of certain rules of the game, but internally put in writing its intention to be able to do otherwise if need be. In the matter itself I agree with you, gentlemen, but I deem it out of the question to write that down. In the matter it is yet the case that there has been a beautiful saying the world for two thousand years: ultra posse nemo obligatur [No one is obligated to do more than they can do.].

So the binding treaties were really “dodgy promises” and the intention was always that the “rules of the game” could safely be ignored if need be.

So was this secret agreement ever used? Yes – and it forced Italy to devalue and leave the EMS in 1992. The Italian government got a call on Friday evening and were told about the secret agreement and that there would be no further support for the Lira the next Monday. This forced a weekend devaluation. To add insult to injury the Bundesbank then leaked to a newspaper that the devaluation was too small, and that a further one was needed. Within a few days Italy was out of the EMS. (Hmm Friday evening meeting; threatened withdrawal of liquidity by the following Monday – I know that reminds me of something…)

So what has changed in 30 years? Absolutely nothing. The same issues are arising and being dealt with in the same way. Only now devaluation or leaving aren’t options. And what will things be like in 30 years time? Exactly the same. The German national obsession with inflation is almost like a glue that is used to hold the country together, such that monetary stability and social stability and democratic stability are seen as one and the same. And this isn’t going to change. An as an anchor for a currency union with 17 or more hugely differing countries it is just totally absurd – the same will crises will just repeat at regular intervals.

To emphasize that the government/Bundesbank would flaunt the rules if need be, Schmidt reminded them that they had done exactly the same a few years previously – in fact he was basically boasting about it (my italics below)

There are at least two things that I would like to draw to your attention that you can verify by your own recollection. Messrs. Klasen and Emminger on the one side and Messrs. Schmidt and Pöhl on the other, acting as a foursome, sometimes even only as a pair, out of consideration for domestic economic stability in spring 1973, not only annulled an agreement between issuing banks but also ran up against international law, against current international treaty law, in releasing the Bundesbank from further intervention in the American dollar. And did not once mention it to the IMF in advance, let alone allow it the possibility of influencing the decision. I say again what I have said before. In spring 1973, we ran up against current international treaty law, the IMF treaty, in multiple ways. We neither followed the whole rules of the game, the procedural rules of the treaty, nor observed the substantive legal requirements .

@Fiat
“To cap it all, the Bundesbank said the ECB has no mandate to uphold the “current composition of monetary union”. Its task is to uphold price stability and let the chips fall where they may.””

The Bundesbank is promoting a position that, imho, is illegal, amoral, destructive and utterly stupid.
To use an analogy of a train driver, whose job it is to drive the train. If hundreds of people through no fault of their own are pushed onto to the train tracks, is it the job of the train driver to roll over them.
The position of the Bundesbank, appears that the train driver must indeed roll over them.

But maybe it is best not to pursue the train theme back into history.

As Tull points out;
“It is probably long past time for Germany to leave the EU and take its place among the community of states run by nut jobs.”

He is not understating the position. The big, big loser from EZ breakup will be Germany. It seems as if the people in the BUBU either do not realise that, or actually wish to foster chaos both in Germany and Europe.

The Bundesbank is a member of the ESCB. Just one member. The ECB, for all its failings, passed OMT with one dissenting voice.
That dissenting voice clearly does not like the quasi democratic make up of the ECB.
A system whereby the ECB did as the Bundesbank dictated would be more to his liking.

PS Where in the ECB mandate, does it say that bondholders must be protected. I don’t recall Weidmann or the Bundesbank getting worked up about that program.
But, of course, the bondholders being protected were in large part, German bondholders. So it was best to make sure the chips fell in the right side of the table.

Germany is eating the lunch of European competitors in export markets, whether intra-EU/EA or externally in third countries.

There are several issues at play here and what you state appears to be the conventional narrative of desk-bound economists and newspaper columnists. I would suggest a look at actual markets would give a more nuanced picture.

In many global business sectors, there are just a few dominant players: Industrial chemicals: BASF and Bayer of Germany compete against themselves and their main global rivals are Dow Chemical and DuPont of the US; Smartphones are dominated by Samsung and Apple; Flat screen TVs by Korean and Japanese companies; SAP of Germany, Europe’s only significant software firm competes against Oracle of the US; Volkswagen, Toyota and GM dominate the car market; Siemens of Germany’s main competitor in the supply of conventional power plants, sophisticated healthcare equipment, is General Electric of the US; Big pharmaceutical firms in Europe are concentrated in the UK, France, Germany, Switzerland, Denmark and Sweden, Elan which was founded by an American in Ireland in 1969, has in recent years become almost a shell operation with 150 employees worldwide.

PSA Peugeot Citroën of France has been dependent on the Western European market for 75% of its sales; the bigger Volkswagen Group sells 40% of its output there and a third of 9.3m units in Asia Pacific – – mainly China.

What is interesting about VW’s total average 2012 head count of 550,000 with 237,000 employed in Germany, an additional 173,000 were employed across Europe.

While issues such as mini jobs, the need for services reform and the lack of a minimum wage in some sectors, are important, why would you think that outside the United States that the global premium car market is dominated by 3 German companies: Audi, BMW, Daimler and Toyota’s Lexus? [I’m not including the real pricey market including VW’s Porsche – – Ferdinand Porsche was the founder of VW – – and the Italian sports car manufacturer Lamborghini that has been part of the Volkswagen Group since 1998. Today, some 950 employees work at its headquarters in Sant’Agata Bolognese. In 2012, Lamborghini delivered more than 2,000 vehicles).

Slovakia, the Eurozone country of 5.4m, is home to 3 big plants run by VW, South Korea’s Kia and PSA Peugeot Citroën.
While overall EU exports to South Korea have risen sharply since a free trade deal took effect in July 2011, a jump in SK car exports to Europe has particularly hit PSA Peugeot Citroën models’ markets.

Italy has 6 companies on the list and Switzerland 5. However, Nestlé of Switzerland, the world’s biggest food company, is at no 4 with sales of $95bn in 2011 while Italy’s top company is at 86 with sales of $10bn — it is Ferrero, the maker of Ferrero Rocher chocolates – – an excellent product combined with innovative packaging.

In recent years, the Belgian brewer of Stella Artois beer acquired the American Budweiser brand. It’s easy to understand why Belgian, German, Dutch and Danish beers dominate export markers with Belgium’s Hoegaarden and Germany’s Poulaner wheat beers popular in Asia. It’s also easy to understand why the Chilean and Australian wine industries trump the fragmented mass market wines of France, Spain and Italy. American beers are too bland while Southern Hemisphere wines have more alcohol with grapes that can assure some depth.

The amazing resilience of the German economy is often attributed to its reliance on Mittelstand companies, small to medium sized enterprises. These typically family-run businesses employ more than 70% of all German employees in the private sector, and are export-oriented, making Germany the second-largest exporter in the world. There is a wonderful account of these companies in the book Hidden Champions by Hermann Simon, former INSEAD professor and now Chairman of Simon, Kucher & Partners. During a recent presentation at INSEAD Hermann described some of their common features:

Most Hidden Champions are extremely focused in what they do. To give a few examples: Jungbunzlauer supplies citric acid for Cola-Cola worldwide (and a few other salty and sweet chemicals), TetraMin is the number one producer of fish food, Uhlmann is the world leader in packaging systems for pharmaceuticals, and Flexi is the number one manufacturer of dog leashes worldwide.

They do one thing but they do it extremely well by achieving tremendous efficiencies , making them cost-competitive despite their location in a very expensive country.

Due to the simplicity of their product lines, their organizations avoid complexities and intricate structures, resulting in very lean management hierarchies.

To compensate for their razor-thin focus on just a single product (or product category), they diversify internationally and enjoy great economies of scale.

Ireland also subsidises heavy energy users; Germany possibly trains workers better than in other places and so on.

Siemens has 116,000 employees in Germany, 75,000 in rest of EU27, 55,000 in US, 29,000 in China and 18,000 in India – – whose lunch is it eating?

German fiscal policy cannot give Fiat a foothold in China.

Nestlé does not continue to enjoy sustained success because of changes in exchange rates or screwing down wage costs – – and that is the key to keep in mind.

As my example Qimonda showed, Germany does in general not engage in rescues by state, or building “National Champions” . Even if that could be justified , as some argued for Qimonda.

Unlike France with their Peugot and trying to micro manage Arcor Mittal.

And that means that companies focus on the swimming part in “swim or sink” and not on crying for government help.

That prohibits the accumulation of notoriously unprofitable companies.

We are not perfect, Seehofer got his 50 m € book printed, the “Quelle Katalog”. I doubt he will ever do something like this again, but he should be gone by next spring anyways, as predicted on the Nockherberg : – )

I have read your link. The Bundesbank is thinking through the consequences of potential treaty violating acts of some of our “partners” in significant detail.

It is somewhat bitter that this seems to be necessary.
It made me start to reread Carl Schmitt “Legalität and Legitimität”

That also brings me to Carolus Galviensis.
I read his recommendation Wilhelm Röpke “Civitas Humana” and can recommend it too.

It is one thing, if a country like Portugal (they have an economics blog now: http://theportugueseeconomy.blogspot.de/ !) which makes enormous efforts, and has its 10-year now below 6%, jubilate!, might come at some point a little short, and need some additional help.

It is another thing to see France doing nearly nothing to keep to treaties, where not so much would be required.

@ Tull
The big step in thinking is this:
This is not about nation states – this is about financial institutions trying to make a new class of billionaire financiers at the expense of the masses. They are exploiting national divisions.
This sounds a bit daft and conspiratorial but it’s not. Trace the role of big finance in all of this. You might not like to because its more satisfying to beat up on political parties/public servants or other nations but the facts are the facts. The people doing well in a crisis are usually the ones behind it.
And it’s not all financial institutions either – just the thick but arrogant bast***ds who can only make money rigging sovereign bond markets and lying about subprime mortgages. Investment banking is now exploitative banking.
The problem is finance is global and politics is not.
Across the world the aspirations and the challenges of people are the same. Across the world the challenge of stopping psychopaths wrecking it for everybody is the same.
We will learn…some day…not now….but even though I’m an atheist I support the man who threw the bankers out of the temple. He saw didn’t do a bad job but even that doctrine of peace was hijacked by psychopaths.

I have no sympathy for Merkel hair-shirt philosophy that she imposes on the German people .It is a little bit like mouthwash “It tastes bad ,so it must be good for you “.I also agree that the middle of a recession is certainly not the best moment to try to balance the budget .At the same time I think it is delusional to think that Ireland woes are due to external pressures .The end of the housing bubble destroyed an oversized construction industry that left thousands of low-skills construction workers that are going to be unemployed for a very long time .Same thing for the financial industry that was totally out of proportion with the size of the Irish economy ,run by bankers that certainly are among the least competent of the western world .The Irish consumers have the worst debt/income ratio in the EZ and their net worth has been dramatically reduced by the collapse of the housing prices.
The budget is still in deficit by 7,5% while the taxes are among the lowest of the EZ. A part of the public sector employees are among the most expensive in Europe ,so are your university presidents, your medical profession and your lawyers .Your ministers and your parliamentarians have obscene incomes ,nearly as bad as the Italians . I am sure that the long term prospects are excellent , the Irish are creative and well educated ,but you have a lot of reforms to perform, even after the Troïka’s departure. It would be nice if the central countries economies were booming and pulling along the peripherals , but I am afraid it will not happen in the foreseeable future.

The EZ gave us access to low cost funds due to Germany being the keystone and guarantor of the Euro. We abused our access to the lowest interest rates the country has ever seen. Im Deutschland vertrauen wir worked very well for the EZ members. Unfortunately Germany did what Greenspan did and that was to allow access to the punch bowl long after it should have been removed.Did Frau Merkel ever suggest to Bertie that she was contemplating reining in the profligate countries and did he or did he not tell her to commit suicide.

The phrase “unable to pay the debt” comes up often here. A country to become unable to pay its debt has to meet a number of criteria:

1) Have no control over its own currency.
2) Borrow a high proportion from foreigners.
3) Have its debt denominated in foreign currency.

Looking at the EZ as a whole it could never become unable to pay its debt. The US is far more exposed to foreign (Yuan,Yen) currency and more vulnerable than the EZ.

Now where does this leave dear old Ireland. In a very good position if we are to believe what is written in Brussels.

If we had something resembling competent government our problems would soon be over. The only thing we can blame EU institutions for is being too generous by far. This has allowed our populist pols to continue doling out the goodies from the candy shop on Kildare Street. That is what we vote for and we should not complain unless we are willing to put our votes where we put our mouths.

Lending to SME is low due to lack of demand and the poor quality of collateral. The banks are desperate to make a profit and are not in a position to roll the dice like they did pre 2008.

At this stage massive public works projects may be the only way out.

The mighty and unconquerable Daimler parent of MB cars, trucks and buses is now entering shaky ground as the Japanese Abenomics campaign succeeds in devaluing the Yen. Angela will soon fall in love with a devalued Euro which will be a relief for all of us. Obama will be livid as he is trying to devalue the $US, are we headed for a widening of competitive devaluations. Serious stuff coming up not the least of which is a serious blow to globalisation.

Eureka,
You are misinformed and histrionic on both counts. All the govt is proposing to cut salaries in the PS to more affordable levels. They will still be overpaid relative to international & Irish norms. Their pensions will still be superior and unaffordable. I suggest you read the FF motions closly- pro choice they ain’t.

@ Tull
But as to being misinformed and histrionic I don’t accept that my good man.
From your lofty perch you may have missed that the Irish boom has left the legacy costs of inflated mortgages and rents in the economy.
You also don’t comment on the fact that the government didn’t vote against banker’s ridiculous pay.

Doctors and nurses do something useful – bankers don’t do jack for anyone.

That’s about it – in a few short sentences. Further comment unnecessary.

and: “Isn’t it time we had a decent left of center slightly liberal alternative.”

Yes it is, except that the median Irish voter is firmly parked right of center – so a LoF party would be a genteel, permanent opposition. Political outlook for Irl is not good. Sheeple will support the status quo – if it is populist and RoC only.

Thanks for the detailed response. It contains a lot of material which seems to bear out the points that I have been making with regard to the German economic policy approach, and its excessive reliance on exports, rather than the opposite. Deutsche Bank in its study, for example, refers to the “temporary monopoly” that German firms have succeeded in creating in various sectors which makes them impervious to changes in the euro exchange rate.

If Ireland is subsidising energy prices for industry is news to me and if it is, it is equally stupid in doing so. Indeed, the core of my argument is that it is a mugs’ game for countries other than Germany to try and play in this league. But domestic vested interests ensure that they do.

I must repeat that I have absolutely no objection to Germany exporting itself out of existence if it wishes to. The problem is that such a policy is not compatible either with a genuine single market (i.e. free of competitive distortion) or a single currency. Some of the supposedly learned economic commentary seems to me to be void of common sense. It is the imbalances in the real economic performance that are creating the monetary payment imbalances, not the other way around.

The export-led policy does not even make much sense for Germany as the question posed is what the country should do with regard to investing such surpluses. The history of the investment vehicle Rhinebridge is only one example of literally, it seems to me, giving away exports for nothing.

Regarding the other issue – I respect all opinions on it and won’t enter into that discussion here. I merely brought it up to show that there is a constituency in Ireland that is not adequately represented by parties in government or in opposition. Think of them as the equivalent of many Democrat voters in the states.

Now before you come back at me – do read the link. And do take some time to think how a government that failed to oppose a ridiculous salary for a banker is going to face down a nurse or a teacher or any other person who does a worthwhile job in this society of ours.

I have no problem with reform of the over privileged and expensive PS.
The state only controls 15% of BOI so they would not win the vote. Let’s see what happens to pay and pensions and levels of employment in the banks- all are going South. Bankers like Richie have their uses, he pays a lot of tax,

We accuse the Americans of focusing on irrelevancies while their economy burns down. We have to be careful that we do not fall for the oldest political trick in the book and that is chasing red herrings set by politicians to divert us from reality. I am referring to Pro, Anti, Gay or Sad all amounting to nothing compared to living in poverty.

let us actually start with prices in the US (and numbers in Euro cent / kWh ! for simplicity)

production costs there are in many places, due to local cheap coal: 3 -4
low volume end customer : 8 US = 6 € cent

Europe production: 6.6 in this table, I remember that 2 years ago volume was trading at 5, some kind of mid term average (KWK) at 4, and trading just now at unbelievable 1.7 (http://www.eex.com/en/) booooooaaaah

This is just covering the fuel costs, not the plants, and even that only after brent has fallen 30%

What is charged to the little end customers (Table 2, is 5 times higher, Germany is now in many places at 29 cent, and not the 25 from this 2011 table, because of the addon for photovoltaics (PV)

People do not like the high prices, surprise, surprise, so the Greens have to deviate the attention from the escalating green costs to somewhere else. Especially since all those jobs in the bankrupt PV companies are gone.

And with Merkel basically front running all social democrat / green topics, they are desperate for a wedge issue.

The “subsidized heavy users” in Germany, actually medium companies, because most really large ones have their own power plants, who believed assurances, that they will not need to built their own plant with 5 c cost, but are charged just somewhat higher, who pay now 12.4 instead of the 6.6 in own production, or 9.4 in the neighbors NL, CZ, PL should now be squeezed more, to cover for this.

It is a wonderful election topic, because 99% do not know or understand such numbers, and it makes for wonderful international mongering against Germany too.

You kill an existing aluminum factory in Germany, to built a new one 30 km over the border, or more likely in the US, because the disadvantage in Germany becomes too large. This is certainly an effective way to cut down on German exports.

But would you call it fair?

These new factories would not be built or generate Jobs in the GIPSI countries, if you look at the prices, and where the aluminum is needed.
The green politicians, who bring this, understand what they are doing, trading votes for destroyed jobs.

I have voted for this party for quite some years, but if you see too many of these dishonest acts, it becomes just too much at some point.

Last thing:
If you built your factories close to the customers, and have the supplies local, that you become insensitive to exchange rate, and the german companies did this since the 1970ties.

Having read your detailed reply, I have concluded that it deals with many issues relating to energy but not the one that I raised. What I see as untenable in a single market with a common currency is the largest economy, Germany, making ordinary consumers pay to give, or to allow to retain, a competitive edge to its heavy industrial users. It has the inevitable impact of dampening further consumer sentiment and puts Germany’s current account into an even greater state of imbalance (as the latest figures reveal) and adds further strain to the euro system.

It seems that the arrangement is now seen as an inherent distortion of competition in a domestic context and will probably be scrapped.

It is just one example of the kind of action by countries of the EU which prevents the creation of a true single market; essential to the survival of the euro.

In the market arena of mobile capital, it’s big name companies that hold the blue chips. Governments and in the US, states and municipalities, competing against each other, pick up the tabs.

In March 2011, Twitter headquarters in San Francisco was picketed by residents of the Central Market area where the web company was planning to move to after blackmailing the city government into giving it a payroll tax exemption. Twitter had threatened to leave the city.

The protest group organisers said:

“They are a giant tech company that is taking advantage of a City that is desperate for a creative economy and revitalization. They want corporate tax break, but yet they demand they have THEIR OWN muni bus lines and police foot patrol designated specially for them. Those things cost money! Who will pay those cops and bus drivers? The City (well really us since our money goes into the City)!

There are over 7,000 residents in the Central Market and surrounding area that Twitter will be neighbor with. There are no protection to the residents and small businesses that once Twitter moves in the landlords won’t raise the rent on their tenants that will force them to leave their homes.”

Six months later, IDA Ireland announced that Twitter would locate its EMEA hq in Dublin. It was presented as a mighty coup. There were no job targets mentioned but one thing was certain was that the company was given juicy inducements. A year later, hiring began for mainly administrative positions with fluency required in a wide range of European languages.

This was a flavour of the faux-excitement:

You really can make anything happen…Fluent in Spanish? Passionate about Twitter & helping its users?

Why bother with sex when you could be in ecstasy all day in a Twitter cubicle!

For local impressionable policymakers subsidising employment for other Europeans was a lot more sexy than fixing the broken apprenticeship system for their own unemployed youth citizens:

The flaws in the aspiration for Dublin to be recognised as the ‘Internet capital of Europe,’ a ‘world class knowledge economy’ by 2013 or a significant financial centre, eventually become evident when most of the activity provided by the dominant foreign-owned firms in these sectors, is routine donkey-work.

Silicon Valley, Tel Aviv and Los Angeles head a 2012 ranking of the top 20 global high tech startup clusters, with Bangalore, India and Santiago, Chile, at the bottom. London is at rank 7 and Berlin is at 15. Asia isn’t very well represented so far and Dublin is also missing from the rankings.

This week in Beijing, President François Hollande picked up a letter of intent for 60 Airbus aircraft – – good news for several European countries but also the US — 40% of Airbus’ procurement is in the United States.

Finally on electricity subsidies, Constantin Gurdgiev in an analysis of H2 2010 Irish electricity costs, estimated the price premium paid by households over and above industrial users at 65.8%.

The issue that I am endeavouring to debate is the use of measures distorting competition in the European Single Market. That others are up to the similar antics in other jurisdictions is not something on which I have expressed any doubt.

To change the subject to a more promising line of debate, FYI a piece by Colm McCarthy rightly taking apart the attitude of the major economies, notably Germany, to banking reform.

P.S. The Irish energy price issue is evidently one worthy of wider discussion. But it is not directly related to the German case which consisted of an actual levy or, rather, relief from having to pay it.

OK, that was too lengthy, because I tried to put things into a global perspective. I am learning : – )

Soo, to rephrase it:

Germany already put its heavy users at a substantial competitive disadvantage to all relevant neighbors in Europe, and even much more compared to the US, by charging substantial nonrecoverable levies (Table 3).

To aggrevate this even more, would be deeply unfair.

And counterproductive, because it would force those, who already pay twice the production costs, out of the country,or to build their own power station. Then there is no large fee paid anymore.

Most European countries charge their final small customers much more than needed for the production of this energy (Table 2, some as tax, some invisible in high “network costs”). The comparison to the US is especially brutal.

They do this to raise revenue and to steer people away from high energy usage, charging carbon emission fees, etc.

This is in Germany even more aggrevated by the subsidizing of photovoltaics via feed in tariffs and charging this to the end customers.

But the people here voted for that, enthusiastically, repeatedly, to argue against it was next to impossible. And they are just waking up now.
And that puts the Greens in the hot seat.

Thanks for the reply. The energy situation in Germany is as complex as it is in other countries of the EA. As recently as the negotiations on the Lisbon Treaty, they collectively insisted on retaining control of the “mix” of energy at a national level. My point does not, therefore, relate particularly to Germany but to the fact that it is difficult to imagine a successful Single Market and a successful euro without, at the very least, greater coordination of energy policies.

By the way, Germany is now also a major net exporter of electricity to other countries of the region.

Denmark from being 99% dependent on imported oil for its energy requirements in 1973 is now self-sufficient in energy.

The simple point about the German surplus in a Single Market that is riddled with loopholes and where other countries are eager to attract jobs from other member countries, is that fiscal policy changes would only have a limited impact unless a German government was prepared to create disincentives for its big employers to move significant operations elsewhere.

Of course a German government wouldn’t do that and this week General Motors announced it would invest an additional €230m in Opel, its struggling European subsidiary, headquartered in Rüsselsheim, Germany.

Even the possible loss of a few hundred jobs had got a lot of political attention.

Good news for Fianna Fáil — the parties that wrecked Iceland are back with snake oil in new cans.

Erza Klein in The Washington Post says Paul Krugman has been clear that he believes deficits are a problem over the long term and points to a 2011 blog post.

But I do get the premise that modern governments able to issue fiat money can’t go bankrupt, never mind whether investors are willing to buy their bonds. And it sounds right if you look at it from a certain angle. But it isn’t.

What will happen to Germany (and Greater German Dominion aka 4th Reich aka EUrozone) when the Chinese copy the products and replace them with own manufactured goods?

They already have successfully copied (and improved upon) high speed trains leaving the likes of Siemens scratching their heads, hell even the German BMW SUVs have been copied almost identically for local variants

Dont forget that for foreign companies to operate in China they have to relinquish the control of the Chinese company they setup to locals.

“Picasso had a saying – – ‘good artists copy, great artists steal’ – – and we have always been shameless about stealing great ideas,” Steve Jobs, Apple co-founder, once said. There are inventors and innovators and the latter can be successful imitators and many successful business are a testimony to that. McDonald’s, Wal-Mart, Ryanair and Facebook are among successful imitators.

In a decade, China will be spending as much as the US on R&D and will be eager to protect its patents. There are questions about the innovation culture in a one-party state but it would be foolish to underestimate the Chinese.

Steve Jobs maintained that Microsoft’s Windows software had been copied from Mac software and today a smartphone could have as many as 250,000 patent claims (mostly questionable) according to David Drummond, Google’s chief legal officer. How to keep track of that!

Battles rage on patents but in the early 1980s software was evolving in a similar manner to the great technological breakthroughs a century before.

Who for example invented the PC (personal computer) operating system is a similar question to who invented the light bulb?

Most people would answer to the latter: Thomas Edison.

However, Joseph Swan patented a carbon filament lamp in England in 1878, and Thomas Edison patented basically the same thing a year later in the US. At that time, there were no patent laws in the Netherlands, so in 1891 Royal Philips Electronics, as Philips, the electronics giant, was known at the time, could simply take the invention and claim it as its own. By 1900, Philips was the third largest supplier of light bulbs in Europe.

Ericsson of Sweden did something similar in 1876: it reverse-engineered Alexander Graham Bell’s telephone, which hadn’t been patented in Sweden.

Copying can be good for innovation – – Germany thrives in what Warren Buffett, the billionaire US investor, calls durable industries. As Audi says: Vorsprung durch Technik (Advancement through Technology). Most of the leading German companies are old but durable.

Curiously the opportunists have also been durable: General Electric (formed in 1892 from a merger of Edison’s company with a rival), Philips and Ericsson are still in existence.

@Mickey Hickey
There is next to nothing that the socialist party can do to influence Hollande policy. For one thing the party is splintered between a multitude of factions that cordially hate each other , from the extreme left to the center. Mainly Hollande is elected for five years and can do more or less what he chooses during that term .Technically the socialist majority in the national assembly could censure the government but then Hollande would dissolve the assembly ,as a consequence the socialist party will get clobbered in the elections and most of the deputies lose their jobs ,not likely . The real issue is what Hollande can do out of desperation (he is the most unpopular French president ever -24% approval-) ,nobody knows and probably not himself .

I don’t want to make it a habit to comment everything here, and will probably show up much less in the near future, but:

@ DOCM

YES! On those 2 point we agree a lot, and we should celebrate that …. While it lasts : – ).

a) The energy situation is complex, not only in Germany
b) And we should try to coordinate this more, but in the last 4 years all attention was eaten up with the financial crises

I was and I am actually, like the majority, but not by a large margin, in overall Europe, OK with nuclear power plants.

And I looked back, what decisions Merkel actually made without the SPD, and extending the life of the existing nuclear power plants, was one of the very few, in 2010.

But then came Fukushima, and all talk about that we don’t have earthquakes of this magnitude here, and of course not tsunamis, which took the 20 000 lives there, and the plants maybe 5 -20, as far as I know.

All this talk did not help, that some 70% of the people were afraid of the nukes. And at some point you buy social peace, with a long term higher electricity price by about 2 cents (compared to 29 end customer now).
And we don’t have any own nuclear fuel, and building new nuclear power plants also requires in soft countries some 10 c / kWh guarantees, there was something with EdF in the UK.

So it is also not a long term solution. And I just want to mention a Nordhaus 1973 BPEA paper, with some 200 year outlook.

So technically I am pro nuclear, but politically Angela made the right decision, I believe now.

@ Michael

I missed out on the little 230 m for Opel Rüsselsheim. For me the much more important news is that GM disappears completely from Bochum, even the logistics now. Well, the GM guy gave them the Hannibal, and the metal worker union told him “F… You” with his demands.

Does anybody know more about Iceland, or are these people as stupid as I believe? Such a short memory.

In Italy 30 % also voted for Berlusconi, the guy who brought them within days of bankruptcy.

EIS,

This copying will be a serious issue in the future, but most folks I talk to, say, they are aware of it, and that there are ways to limit that somewhat.

This Maglev train is way overhyped. Beautiful technology, but in the moment you try to translate that into something practical, the numbers don’t add up, at least not in Europe. This technology makes only sense, if you have > 100 km, preferable 300 km between stops, is not compatible with any existing infrastructure, and for a little larger distances competes with the air planes, which are less noisy (!) and need a lot less space, maybe unexpected for some.

We tried for 30 years, in vain, to build some kind of actually used “demonstrator”.

Well, and having my name on 38 patents, it is also easier to say, that many people see the whole patent system as deeply flawed, basically a tool, where old incumbents can keep the new up springs down, and a gigantic work destruction program, of course profitable for legions of lawyers.

@DOCM
Thanks for link to Colm McCarthy’s article.
I would query one small part…
“The financial meltdown here in Ireland need not deprive the Irish Government of a voice in Europe’s deliberations on banking union. On the contrary, as a principal victim of the design flaws in Europe’s common currency, Ireland is particularly well placed to draw attention to the inadequacy of the current policy response. A banking licence is a privilege and banks are regulated for very good reasons.”

The Irish government cannot even manage the two pillars banks as we have seen with the recent AIB rate hikes and the inability to rein in obscene pay packets in BOI. What chance of them bringing any useful influence to the powder keg of European banking regulation.

@overseas commentator
If France was Germany you would be right. The French are noted for re-enacting the storming of the Bastille (July 14, 1789) when provoked. High youth unemployment with no end in sight is certainly a provocation and not just in the banlieues (suburbs, social, low income high rise housing, opposite of US). The last memorable uprising was in 1967. If the Socialist Party weighs in with the mob Hollande would have to come onside or go into exile. In Germany when I say Civilisation is skin deep I hear objections, in France they know it is just skin deep and act accordingly. Farmers blocking roads, highways, railroads as they do in France is quite rare in the rest of Europe.

I am puzzled at what is holding Spain together unless it is the horror of their last civil war. There are now 3 generations of unemployed cooped up all together in apartments living on welfare on the edge of hunger. Spanish families may be stronger than most in Europe but there must be a limit.

For most EU citizens, its institutions and its politics appear pretty remote from their daily lives. Politics remains tightly focused on national parties and parliaments, as far as most ordinary voters and career politicians are concerned. Political scientists suggest that fringe parties and movements, such as the Greens or parties like UKIP, for instance, tend to find it easier to get elected to the European Parliament than to national parliaments. From the electorate’s point of view, the stakes are lower.

I recall watching an episode of a Danish political drama on BBC Four recently which was about the selection of a nominee to the EU Commission and which was sub-titled: ‘In Brussels, no -one can hear you scream.’ Nobody who was anybody, or had any real aspirations to national power, wanted the post. The fictional Danish PM saw the position as an opportunity to get shut of a particular thorn in her side or potential rival for her own job. It was all very reminiscent of what happens in real political life in Ireland.

The crisis has exposed the weakness and fragility of the EU institutions. Far from acting as the ‘protector’ of smaller member states, the Commission was pushed aside early on in the crisis by the Merkozy axis. The European Parliament is like a Greek Chorus, providing futile commentary from the sidelines on the main actors in the drama but essentially powerless to influence their actions in any way. After the interventions which saw the democratically elected governments of Italy and Spain effectively deposed and replaced by technocrats, and the incompetence of the ‘deal’ imposed on Cyprus, while a majority of citizens may remain positive toward the idea of the European Project, public confidence in its institutions has been badly shaken. Polls that register strong support for the EU may thus be relatively meaningless – the general concept retains support but the institutions have failed. Maybe the debate needs to be more concentrated on EU reform and how the balance between the institutions might be restored rather than the current blame game? Otherwise, Kevin O’Rourke is quite right and the eurozone crisis will give way to a larger political crisis in due course.

@ Bryan G, Fiatluxjnr
Thanks for those posts. If it is mainly politics and all rules are “malleable”. It seems that rational economic thinking becomes somewhat meaningless /or at least misguided by definition. Yet, people like the “comfort blanket” of economic theory.

Austerity “politics” works for the “insiders” of course. But why does the majority acquiesce so easily…..Is the world so full of knaves and fools as Krugman says….? Or are the McHales & ilk just self-interested in reality (“insiders”)?

My “theory” remains that, given its “irrelevant” size and lack of real influence in the “bigger game”, the older majority in Ireland is quite content to suck the EU teat…..It’s just another manifestation of Ireland’s historical “neutrality” (on most serious issues, from war to abortion). Real “fights” are for others, and the Irish “cute hoor” mentality (majority?) thinks itself very smart to be surviving in the “cracks” as I say (always play both sides).

A very senior PE guy in NY recently said of the Irish – great at business intros; totally unreliable to be discrete /maintain confidentiality (paraphrasing: always looking for the cute hoor angle). There’s some truth in that (but f**k this NY Jewish guy….although currently a “friend of the Irish Government” as he and his crowd “invest” (financially rape) the country…..Can’t say anymore, but it’s disgraceful and amoral what happening “on the side”.

That’s how it is. However, it would be good to see something better emerge and evolve in Irish thinking and society….Some real gumption to go with the “can do” banner. Less of the BS side of my middle-aged and older age groups.

up to 11 mio on strike, but as a result absolute majority for de Gaulle, and the end of this

List_of_trade_unions_in_France

875 + ( 160 ) + ( 300 FO) + 710 + little = 1580 – 2060 k

That does not strike me as representative of the

General_will (“Volonté_générale”)

So far I would not join into calling them “mob” as Mike above : – )

In comparison the

List_of_trade_unions_in_Germany

lists one central organization with 6600 k, but who have never claimed to represent more than the interests of their members.

The idea, that some tiny criminal special interest groups should have any right to rule over the Sovereign, the parliament, representing the, and elected by the democratic majority of a nation, sounds so absurd for people like me.

A European Commission, overstepping its powers hugely, to “protect” such special interest, how should that translate into any practical action?

Reading my latest post above again, I should add that my “NY Jewish guy” reference is not in any way racist. It is factual. Some of my very best friends are Jewish.

PE guys in general are not “friends”….they are part of the financial clean-up system, that’s all. But (and apologies to the sensitive) tighten your buttock cheeks when you seek them coming is the rule.

Apple are a bad example seeing how their stock is tanking and how their hardware is already manufactured in China at what amounts to slave factories where quite alot of people have been topping themselves.

(One of) the battle cry of the American Revolution 1776 was “no taxation without representation”.

Or, to shorten that for the 21st century: “No say, no pay”

When an American FED engages in Quantitative Easing (QE), it is an institution established by the rules of the American people, and the US people benefit from it, or have to pay the price for it.

When a (large) majority in Germany votes, repeatedly, for sky high electricity prices, I have to oblige to that in Germany, grudgingly, as I want to say.

When the French people practice their democracy in ways, which are different from ours, I might hold my nose, but I will not attempt to interfere, as long as they do not violate human rights or fundamental EU treaties.

But I will not pay one cent for the consequences either. “No bail out, no money printing”.

And for our UK partners it also holds the other way: “No pay, no say”.

The people, who decide on the expenses, must be liable for them. Anything else creates moral hazard, for which we do not have a good German word.

And even in Germany the “Länderfinanzausgleich” is now brought before the Supreme Court, because some feel to be unduly abused.

I would be willing any time, to pick up a gun and defend my country and my allies, even at my age, if the cause is just,

I do like wiki John_Quincy_Adams, it makes me actually a fan of him:

“As president, he sought to modernize the American economy and promoted education. Adams enacted a part of his agenda and paid off much of the national debt”

” Adams as the exemplar and moral leader in an era of modernization. During Adams’ lifetime, technological innovations and new means of communication spread messages of religious revival, social reform, and party politics. Goods, money, and people traveled more rapidly and efficiently than ever before”

He spent time in Finland, Sweden, and Denmark and, in 1804, published a travel report of Silesia

He apprenticed

goes not abroad in search of monsters to destroy”

There are a lot more valuable things to read there.

What many people today denounce as “german hegemony”, those are core american democratic values, born out in a revolution.

The question I ask myself is did they know what they were voting for? And my answer is they were enveloped in the warm fuzzy feeling that Mutter Merkel would save them from a fate worse than Fukushima and voted accordingly. Energy cost increases were far from their minds, less competitive manufacturing sector did not matter, increasing unemployment, who cares.

And the answer is: at that times (1998, 2002, 2005) they actually voted for red/green Schröder/Fischer, and not for Kohl/Stoiber/Merkel

2009 was a classical “Stick with the incumbent” Merkel, in times of crisis, at that time with a SPD Steinbrück finance minister, and havent done anything severely wrong.

I am with you with the “Sober second thoughts” and
I actually hope, that more folks now are looking at the costs, and whether their fears were overblown in 2011.

and therefore NOT vote for red/green, who want to raise taxes to 49% at 60k family income, as the Greens decided today. That would certainly put a damper on the willingness to spend, and vacation in the GIPSIs and buy stuff.

Rising house prices and values do affect consumption. The seller gets more money and receives a windfall. People who have equity feel wealthier. I am not saying it is a good thing or a bad thing. However, it is a mistake to think that rising house prices reduce consumption.

House prices rising at double the CPI rate more for 5 to 10 years distorts the economy. Able bodied skilled and semi skilled workers are attracted to house construction leading to labour shortages and rising wages in manufacturing. When the bubble bursts the manufacturing jobs no longer exist and you get the Irish, Spanish unemployment rates.

I heard on English language radio news this morning that Berlin and Frankfurt have joined Sydney, Canberra, Toronto, Vancouver and London as cities with a bubble growing.

Germany is not immune to the attractions of mortgages at close to or less than the rate of inflation. It will be interesting to see how the German federal and Lander governments deal with the excess liquidity problems. Will they resist the siren call or succumb to taking the line of least resistance.

In general terms, and in normal times, you are right, or at least more right than my last statement about impact of house price rises.

People who buy a new home, also tend to buy stuff to decorate it, fix it up, ….
Would these goods come from the GIPSIs?

But we do not live in “normal” times now.

30 year German bunds, like ISIN DE0001135481 selling at a 1.55% interest after tax, with a stated 2.0% inflation target for the Euro Area, and therefore most likely somewhat higher for Germany for some time, this is crazy, like loosing every year 1 % plus the risk.

Soo, the obvious question is, who is selling what real estate in Germany for what reasons.

Even Fortresss (ticker symbol FIG) is keeping to their Dresden real estate, despite their disappointment over that german law applies to them as well, and the “Social Charta” they signed, is strictly enforced.

I tried to get some idea of who is selling, interesting intellectual exercise. I still believe, the sellers would not feel some “wealth effect” and increase consumption, but I don’t see any way to show this.

What are your ideas about that?

@ Mira / eureka

Berlin is so far still some biotope of its own, this is not your typical “Capital” of a western nation. The Kreuzberg freaks now see Gentrification marching in. I know folks there.

And real estate price adjusting to “more normal”, they clearly experience as a brutal bubble. I believe: They ain’t seen nothing yet.

Deutsche Bank said in 2011: Prices climbed above their 1995 level for the first time last year. Until 2005, they had fallen across nearly all segments. In real terms, prices are in fact nearly 20% below the prior level and 2010 saw them rise for the first time at all in the period under review.

Basically most of the intelligence, work, and potential problems of this index are in the proper construction of the inflation index.

The American realtor organization used to publish a House affordability index (HAI), based on the assumption of 25% of income used, and a 30 year mortgage, but they stopped that about 2 years ago, because this became non-sensical. But I think this is a useful rule of thumb in general, in “normal” times.

I do follow the local market closely, having graphs going back to 1998, when we had a crash here. Last year we had a 21% rise of prices in the 1-bedroom segment, but which makes sense, given the interest rates. Prices are up by 54% since end of 2008. Not unreasonable, so far. But my sense is, once you get the bubble started, which is kind of now, it becomes very hard to stop it, and people go mad, to jump in. More and more people use financial structures, which can blow into their face in 5 – 10 years down the road.

We had here some subsidizing of low income families until 2002, which distorted the market, with the bizarre result, that people just scraping by, bought, and I still rent, because buying didn’t make economic sense for me, something very hard to explain to most folks in other places : – )

And I do not even own a car. I must be really dirt poor. LOL

@ Dorothy

I think, in general Michael is right for Germany as a whole. But there are local bubbles developing, your Hamburg Hafencity, the wider Munich region, Frankfurt.

The various house price indices out there all leave something to desire, nothing comparable to a Case-Shiller.

There are offers for essential zero down financing. When do we ever learn?

My opinion on housing bubble brewing was formed in part by one of my nephews and his wife buying in Hamburg last year. I discussed it with him and his development bank economist father. They were agreed that house prices are ticking up and that a long term mortgage was advisable at prevailing historic low rates. Being Germany the lending brakes will go on before the situation gets damaging to the economy as a whole. The business newspapers frequently comment on the healthy housing market in recent months. It reminds me somewhat of other bubbles I have witnessed, there is always an element of having to buy before it is too late and mortgage interest rates go up.

There are some folks, who say we gained a factor of 100 in GDP over the last 200 – 250 years (2 % growth, as a stylized fact)

A recent NBER w18315 paper from Robert Gordon “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds” uses UK data, which look more like a factor of 13, and the Herengracht data say: basically constant

b) long term expectations
Rent price ratio is historically at 1:16, pretty much the same as the PE ratio for the S&P500

And if we now have services at 80% of the GDP, we are basically consuming just each others time, and this can not grow at all.

We were never willing to flirt with inflation and instability. But I dont believe that is what you meant.

There is a similar saying here: you can get the people out of the balkan, but not …

And I remember having a chat with a romanian guy in canada, for nearly 20 years, who at some point hit me (verbally) over the head with some german imperial conspiracy theory, which then turned out to be romanian politicians unwilling to fill out the EU forms,and delivering the receipts, just like all the other 26 countries.

And then I looked back, and came up with about 9 personal stories, where people from the balkans, mostly Greece were just so willing to bend reality to some (mostly conspiracy) theories, but in physics as well.

In Ireland the “Bog” is where peat is cut, dried and stored. Luneburg Heath has bogs Pietzmoor is one where peat was produced up to the 1960s’.

As an industry peat was as important to Ireland as coal was to Germany. Cheap oil in the 1960s’ and later cheap natural gas sent peat production into decline.

The reference to bog is in the context of the workforce associated with peat production. Peat production is always rural, small scale and has gone on uninterrupted in Ireland for over 2,000 years. The people involved were seen as conservative with rigid mindsets even by rural standards. They would arrive in Manhattan and write home that the place is an unproductive wasteland without a bog to be seen for a 1000 miles around.

Hence the saying which highlights the difficulty they had in adapting to changed circumstances.

Your view of Germans being blind to anything outside of economic and political stability is not what I see. Over a long span of history Germans have proved to be more volatile, passionate, inflation prone, politically and economically turbulent than anybody else in Europe. The period since 1914 (which the British started) including Versailles, Weimar inflation/collapse, National Socialist rebuilding, WW2 and the enormous progress made since 1952 have shaped the Germans of today. This phase will soon pass and you will return to the German Renaissance of the 15th and 16th centuries which will be known as the German Renaissance of the 21st century.

Thanks for the Bog explanation. Well, some Irish emigrating to Boston and New York found the police departments as suitable for employment :- )

Just 2 more national stereotype things:

I read recently (alternet / Counterpunch) that some arch conservative folks, many 150 years ago, Germans from Russia (!), in Bismarck, North Dakota, also have this Sparkasse like community banking, with this typical multi hierachy (Landesbanken) only developed in the 1930ties.

And last year it was the French students in Quebec who went on strike. Some habits seem to be pretty persistent : – )

With a median debt in insolvenz of just 12 k , these myths of the saving Germans sounds so weird. Banks have to figure out the credit risk estimation, and then make their offers.

Thanks for mentioning the German_Renaissance. Pretty interesting read. It made me also to wiki Italian_Renaissance and thinking about, whether some 200 year drawn out decay of GDP per capita by a factor of 2 could be possible again, as in this Gordon paper described as well.

What also went through my head is that after the plague decimated the population, wages grew.

Sometimes I think the shrinking working population in most of Europe (with Ireland the usual exception) will also turn the balance of power between labor and capital somewhat towards the former, and that Spain was not so clever to import 15% of their population during the noughties.

For a long time the central location of Germany was a disadvantage, because many of the wars happened here. During times of peaceful commerce, of which we hopefully now have many more, it is an advantage. You even meet a lot more people of all around the world without the travel expenses : -)